On the Performance of Cryptocurrency Funds

Abstract

We investigate the performance of funds that specialise in cryptocurrency markets. In doing so, we contribute to a growing literature that aims to understand the role of digital assets as an investment. Methodologically, we implement a novel bootstrap approach that samples jointly the cross-sectional distribution of alphas and controls for the nonnormality of fund returns and their within-strategy correlations. Empirically, we find that a sizable minority of managers are able to cover their costs and generate large alphas. However, there is weak statistical evidence of managers' skills once withinstrategy common variation in returns is taken into account.

Financial literacy or investment experience: which is more influential in cryptocurrency investment?

“…Although previous researchers have not agreed on whether cryptocurrencies have value as a currency, most researchers believe that cryptocurrencies have value as an investment (Ciaian et al, 2016). While nascent literature has begun to pay attention to the investment value of cryptocurrencies, including the performance of cryptocurrency funds (Bianchi and Babiak, 2020) and the role of cryptocurrencies in portfolio diversification (Bouri et al, 2017;Dyhrberg, 2016), the literature in studying the determinant factors in cryptocurrency investment is relatively scant.…”

The Diversification Benefits of Cryptocurrency Asset Categories and Estimation Risk: Pre and Post COVID-19

“…For this reason, what becomes important is to decrease the number of estimated model parameters to obtain a better bias-variance trade-off. Tibshirani (1996) proposed lasso regression, which regularizes large values of the estimated parameters towards or to exactly zero, giving a sparse, parsimonious model (see Bianchi and Babiak 2020). Lasso is well-suited to performing sparse estimation and variable selection simultaneously, and possesses the key advantage that it avoids the risk of non-convergence to the global optimum, which affects stepwise regression.…”

“…There is also an expanding number of funds offering investment in cryptocurrencies to both institutional and retail investors. In 2019 PwC estimated there were 150 cryptocurrency investment funds (PwC 2019;Bianchi and Babiak 2020). In October 2021 the New York Stock Exchange listed an exchange traded fund based on Bitcoin (ProShares Bitcoin Strategy ETF), opening up cryptocurrency investment to a wide range of institutional and retail investors.…”

Horizon of Cryptocurrency Before Vs During COVID-19

“…Most researchers do not agree with crypto as a digital currency value, and some believe that crypto has value as an investment (Ciaian et al, 2016). Over time, many researchers began to conduct research on how crypto performs as an investment instrument (Bianchi and Babiak, 2020). In addition, Crypto is useful as an option in portfolio diversification , Dyhrberg, 2016.…”